The pensions issue has found its way into the government formation talks, with Fianna Fáil leader Micheál Martin insisting that plans to raise the pension age to 67 next year will be postponed. It is just the latest example of how the talks process, despite taking place against the backdrop of a deep economic crisis, has focused almost exclusively so far on commitments involving extra expenditure.
Pensions emerged as an issue during the general election campaign as those who retired at 65 years of age highlighted that they were forced to sign on for unemployment benefits for a period following the raising of the pension age to 66 in 2014.
The plan to raise the age to 67 next year and 68 in 2028 was then the subject of debate and a range of election commitments. Now it is back on the agenda, though Taoiseach Leo Varadkar did not appear to back Martin's position.
The gradual raising of the retirement age was designed to address the long-term financial implications of an ageing population. Last year there were close to five people in work for every one retiree, but by 2050 the ratio will be down to two-to-one. Raising the retirement age was a step to addressing this and also recognising that with increasing life spans, many people are continuing to work well past the age of 65.
Anomalies have emerged. Some private sector employees have been obliged to retire at 65 and thus faced having to sign on for benefit for an interim period. Transitionary arrangements are clearly needed and the outgoing Government has acknowledged this. There are also questions of equity between the public and private sector.
However, suggesting that the whole reform process should now be stalled seems unwise. It creates the risk of no other measures being taken to address this long-term problem. In the years ahead, such avoidance could threaten the solvency of the social insurance fund out of which pensions are paid, according to actuarial advice.
The State could decide, of course, to fund the bills via general government spending. But as a recent OECD report warned, this would risk a significant burden which could require cuts in spending elsewhere, or higher taxes. Varadkar has warned that not taking action could imperil the affordability of pensions of many younger people.
So just postponing the pension age increase, rather than addressing these long-term issues, threatens to make matters worse. Better to allow the increase go ahead and commit to wider action on pensions when the Covid-19 crisis has passed.
Some 40 per cent of private sector employees could depend solely on the State penson in retirement – this is a vital longer-term issue which needs to be dealt with, along with the affordability of State pensions. Avoidance is not a credible option.